Montana I-164 | Payday lending on the ballot

Montana

Montana's lawmakers will not have much say if I-164 passes. Image: jimbowen0306 / Flickr / CC-BY

The debate about payday lending and allowable interest rates has reached Montana. Initiative 164, a citizen’s initiative, will be on the ballots that start going out today. If the ballot measure passes, many short-term lenders say it will put them out of business.

How lending in Montana is currently regulated

The way payday lending and short-term credit currently works in Montana, there are limits. A lender can charge only a one-time fee for a short-term loan. If the check or payment bounces, the lender will be allowed to charge one bounced-check fee. Ongoing interest on an unpaid balance cannot be charged. Montana also currently forbids a customer from having multiple payday loans at the same time. Montana’s current regulation is some of the strictest in the nation.

What I-164 in Montana would change

Montana’s I-164 is a citizen’s initiative that would cap annual percentage rates at 36 percent. Similar to Arizona’s “Operation Sunset” and regulations in other states, this would be based on annual percentage rate calculations. Owners of short term credit businesses in Montana say that this new regulation would simply put them out of business.

How I-164 would affect title lending

Auto title lending, where the short-term loan is guaranteed with a vehicle, would also be affected by Montana’s I-164. Under current law, title lenders are allowed to charge up to 25 percent of the loan amount as a fee on a title loan. Auto title lending would also be strongly regulated by I-164, limiting the ability of lenders to repossess vehicles.

Arguments behind I-164

There are mixed reports as to if I-164 will actually be passed by Montana voters. In reality, though, the arguments for and against the regulation are very similar to the arguments for national regulation. The problem, though, is that annual percentage rate is not a legitimate way to measure the interest rate of these short-term loans. Many of the other payday lending statistics used to support these new regulations are simply not supported by the facts.

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